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A higher percentage of cargo will be shipped to markets in the region instead of to global destinations.

ONLINE RETAIL SALES OF GOODS AND SERVICES IN CHINA WAS UP 27.8 PERCENT IN THE FIRST QUARTER OF 2016: Sales of $158 billion for the quarter is driving rapid growth in China’s logistics industry. (Image: Claudio Divizia / Shutterstock.com)

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Forecast: Consumption in Asia Pacific as a share of world consumption will rise from 27% in 2016 to 39% by 2035.

Intra-Asia containerized trade to and from China is forecast to grow at 5.1% per year to 2018.

Intra-Asia trade will increasingly benefit from the rapid growth of consumption in Asia as a higher percentage of cargo is shipped to end markets within the region versus destinations in other parts of the world.

That was a key conclusion in a recent report from IHS Global Insight, which also highlighted the growth of ecommerce in the region and its impact on the development of logistics infrastructures.

“China and India’s share of world consumption is set to rise from 12 percent in 2016 to 27 percent by 2035, noted Rajiv Biswas, Asia Pacific Chief Economist, IHS Global Insight. “We’re also going to see very rapid growth in consumption in emerging Asian markets over the next two to three decades, with Asia Pacific consumption as a share of world consumption forecast to rise from 27 percent in 2016 to 39 percent by 2035.”

These figures translate into rapid growth in the intra-Asia containerized trade, which is forecast to grow at 5.1 percent per year to 2018. Total containerized trade in East Asia is forecast to rise from 25.9 million TEU in 2014 to 31.6 million TEU by 2018, according to forecasts by IHS Global Insight.

The link between rapid growth in consumer spending and online sales will be a primary driver of growth in cargo transportation and logistics services in the region, particularly in China and India. The Chinese ecommerce market is already the largest in the world, having overtaken the U.S., with an estimated 400 million Chinese purchasers already buying online.

Chinese online retail sales of goods and services in the first quarter of 2016 reached $158 billion, up 27.8 percent year-on-year, driving rapid growth in China’s logistics industry. The Indian ecommerce market is also growing rapidly, with ecommerce sales estimated to have risen from $4 billion in 2009 to $40 billion in 2016.

In Southeast Asia, ecommerce is also growing rapidly, buoyed by the rapid growth in the size of the middle class. IHS Global Insight forecasts that Indonesia will grow at about five percent per annum over the next decade, with GDP forecast to reach $3.8 trillion by 2030, up from $930 billion in 2016. “The Indonesian ecommerce market is already estimated to be worth $6 billion in 2016, dominated by online sales to Indonesian consumers for travel-related spending, notably on airlines and hotels,” said Biswas.

Supporting the expansion of consumer spending will be the development of more manufacturing in the region, with Southeast Asia set to continue to enjoy growth in the lower-end manufacturing segment, including products such as garments and electronics, much of it at the expense of China.

Vietnam has seen the annual output value of its electronics sector rise from $6.9 billion in 2011 to $45.8 billion last year. “China’s rising wage costs make it difficult for coastal provinces to compete at the lower end of the manufacturing sector,” said Biswas. “This is an inevitable consequence of becoming a middle income economy, but China’s manufacturing sector is also shifting towards more complex products.”

With projected growth of 7.5 percent per year to 2020, India will be increasingly important in terms of the region’s GDP growth. “A key objective of the Indian government’s focus on infrastructure and manufacturing is to boost the manufacturing sector share of total GDP,” said Biswas. “This is currently just 15 percent in India, well below that of East Asian countries including South Korea and China, where the share is about 30 percent.”

There are early signs that the Indian government’s initiatives are starting to result in stronger investment inflows, Biswas noted. Foxconn recently announced a $5 billion investment plan to build electronics factories in India.